When we recently spoke at CalCPA’s nonprofit committee meeting, we mentioned a big issue plaguing nonprofits – failure to pay payroll taxes. For cash flow or other reasons, nonprofits often fail to make these payments to the IRS and the EDD. These agencies have taken notice and are going after nonprofits that fail to make these payments with a vengeance (as well as their directors and other agents, who may be held personally liable). We’ve seen cases where the claims amount to more than $100,000.
Don’t let this happen to your nonprofit. A new nonprofit must register for a payroll tax account number with the Employment Development Department before it hires its first employee. This can be done online, via mail, or by phone (916-654-8706).
Enroll in the Electronic Federal Tax Payment System to pay federal payroll taxes to the IRS. Go online or call 800-555-4477 to do so.
If a payroll service is used, most will walk new organizations through these processes and make it harder to avoid mandatory payroll tax payments.
However you do it, get your ducks in a row and make sure your nonprofit’s payroll taxes get paid!